Shares of Asian Paints dropped into the red ahead of its financial results for the September quarter on Monday.
The scrip was down 0.78 per cent at Rs 1,228.30 at around 9.40 am.
The BSE Sensex was up 0.32 per cent at 34,426.There are expectations that demand improvement post GST rate reduction would lead to a double-digit volume growth for Asian Paints despite a late Diwali.
Rupee depreciation and rising crude prices will put pressure on margins on a QoQ basis.Brokerage firm Edelweiss Securities expects Asian Paints to report around 8 per cent volume growth for the quarter through September.We would also see a positive impact of cut in GST rate this quarter.
But postponement of the festive season would lead to demand shift in Q3 FY19.
Total effective price hike of around 3.5-4 per cent should be seen for the quarter.
On the COGS (cost of goods sold) front, prices of TiO2 and other monomers have continued to remain elevated.This coupled with a depreciating rupee will continue to put pressure on the gross margins.
However, cost rationalisation measures will aid to some extent on the EBITDA front, the brokerage house said in a report.Edelweiss sees 10.5 per cent, 11.80 per cent and 9.90 per cent year-on-year rise in revenue, EBITDA and core PAT, respectively, for Asian Paints in Q2 FY19.
Prabhudas Lilladher sees 12 per cent, 15.70 per cent and 15.80 per cent year-on-year rise in sales, EBITDA and adjusted profit after tax, respectively.